Fujitsu Reports Fiscal 2015 Second-Quarter Financial Results

Hardware businesses are facing tougher business conditions, but the growth of services businesses in Japan underpins steady progress towards achieving full year targets

Fujitsu Limited

Tokyo, October 29, 2015

Fujitsu today reported a profit for the second quarter attributable to owners of the parent of 2.9 billion yen, representing a deterioration of 14.2 billion yen from the second quarter of fiscal 2014.

Consolidated revenue for the second quarter of fiscal 2015 was 1,176.2 billion yen, an increase of 4.6% compared to the second quarter of fiscal 2014. Revenue in Japan increased 3.2%. Although revenue from network products and PCs decreased, revenue from system integration services and mobile phones increased. Revenue outside of Japan rose 6.8%. Revenue from network products declined, but overall revenue outside of Japan rose, benefiting from foreign exchange movements. The decline in the value of the yen versus the US dollar served to increase revenue by approximately 35.0 billion yen compared to the second quarter of fiscal 2014. The ratio of revenue outside Japan was 40.8%, an increase of 0.8 of a percentage point compared to the same period in the prior fiscal year.

Fujitsu recorded an operating profit of 14.8 billion yen, down 10.0 billion yen from the second quarter of fiscal 2014. In addition to the impact of lower revenues from network products and PCs, there was the negative impact of higher procurement costs in Europe for US dollar-denominated components stemming from the weakening of the euro against the US dollar.

Net financial expenses were 3.5 billion yen, representing a deterioration of 9.4 billion yen from the same period in fiscal 2014, when the company recorded net gain on foreign exchange because of the sharp fall in the value of the yen.

As a result, the profit before income taxes was 13.6 billion yen, a decline of 18.5 billion yen from the second quarter of the previous fiscal year.

Profit for the period attributable to owners of the parent was 2.9 billion yen, down 14.2 billion yen from the second quarter of fiscal 2014. The company's tax burden was higher than the standard effective income tax rate, primarily because there was a review of the balance of deferred tax assets for a subsidiary in Japan that recorded deteriorated earnings.

Business Segment Financial Results for the Second Quarter

Revenue in the Technology Solutions segment amounted to 799.3 billion yen, an increase of 1.9% from the second quarter of fiscal 2014. In the Services sub-segment, revenue from system integration services rose on increased investment by customers in the financial services sector and public sector, and revenue from infrastructure services continued to be solid in Japan and increased overseas. In the System Platforms sub-segment, however, network products revenue decreased due to low second quarter capital spending by customers. The segment posted an operating profit of 36.3 billion yen, representing a decline of 2.9 billion yen compared to the same period in fiscal 2014. In the Services sub-segment, despite the positive impact of higher revenue, operating profit declined because of higher expenses to expand sales in the internet service provider business, and also due to a lump-sum expense according to the change of the retirement benefit plans of a subsidiary in Japan, as well as other factors. In the System Platforms sub-segment, operating profit declined due to lower revenue.

Revenue in the Ubiquitous Solutions segment was 261.8 billion yen, an increase of 6.9% from the second quarter of fiscal 2014. Revenue from PCs, mainly for enterprises, declined. Revenue from mobile phones rose, primarily from the Raku-Raku series of smartphones. Revenue in the Mobilewear sub-segment increased both in Japan and overseas, particularly in Europe. Results outside of Japan benefited from foreign exchange movements. The segment posted an operating loss of 4.6 billion yen, representing a deterioration of 5.5 billion yen compared to the same period in fiscal 2014. In addition to the negative impact of lower revenue from PCs, the weakening of the euro and the yen against the US dollar caused procurement costs for US dollar-denominated components to rise at locations in Europe and Japan. For mobile phones, despite the positive impact of higher revenue, results were adversely impacted by expenses incurred to deal with a defective model. Operating profit in the Mobilewear sub-segment increased because of higher revenue.

Revenue in the Device Solutions segment amounted to 162.1 billion yen, up 11.7% from the second quarter of fiscal 2014. Revenue from both LSI devices and electronic components benefited from foreign exchange movements. The segment posted an operating profit of 7.8 billion yen, up 1.2 billion yen from the second quarter of fiscal 2014. Although an impairment loss on idle assets was recorded for electronic components, operating profit increased due to the increase in the value of US dollar-denominated exports because of the decline in the value of the yen against the US dollar.

The Other/Elimination and Corporate segment recorded an operating loss of 24.7 billion yen, representing a deterioration of 2.8 billion yen from the second quarter of fiscal 2014. The higher loss is attributable to an expansion of strategic investments in such fields as next-generation clouds, for IoT* platforms, and future healthcare services.

*IoT (Internet of Things): A system in which not only PCs and servers, but a wide variety of things are connected to the internet and exchange information.

Fiscal 2015 Consolidated Projections

Fujitsu has revised its full-year fiscal 2015 financial forecast announced on July 30, 2015, as follows. The assumed exchange rates for the second half of the fiscal year have been changed to 120 yen for the US dollar, 130 yen for the euro, and 190 yen for the British pound.

The revenue forecast has been increased by 30.0 billion yen from the announcement in July, to 4,880.0 billion yen primarily due to the impact of the changes in the exchange rate assumptions.

Fujitsu is projecting an operating profit of 150.0 billion yen, unchanged on a consolidated basis from the previous forecast.

There is no change in profit for the period attributable to the owners of the parent from the previous forecast.

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